This site requires a more recent version of Adobe Flash Player to function properly. Go here to get Flash.

Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:

Investment Overview for Estee Lauder (NYSE:EL)

${header:whathaschanged}

Q3 '20 Earnings and Impact of Coronavirus Outbreak

Estee Lauder reported net sales of $3.34 billion in Q3 '20, down from $3.74 billion in Q3 '19. Estee Lauder reported a net loss of $6 million in Q3 '20, compared to a net profit of $555 million in Q3 '19. EPS dropped to -$0.02 from $1.53. The COVID-19 outbreak and the resulting lockdown will likely hurt Estee Lauder's Q4 sales, across all segments, as the current lockdown situation will hurt cosmetic products sales, driving down demand for Estee Lauder's products. The Q4 '20 results in August will confirm this reality.

${header:potential}

Skin Care

Estee Lauder's Skin Care Market Share: Estee Lauder's Skin Care Market Share expanded from 6.6% in 2008 to 8% in 2014. However, its share declined to ~7% in 2015 and 2016, partly due to cannibalization of its older products, and partly due to a shift in order realizations following its SMI implementation. However, in 2018 the skin care segment alone grew by 24% and we forecast Estee Lauder's skin care product market share is expected to gradually grow to over 10% by the end of our forecast period. There could be a marginal downside to our price estimate, if the market share were to remain flat throughout the forecast horizon.

Estee Lauder's Skin Care EBITDA margin: Estee Lauder's Skin Care EBITDA Margin increased from 20% in 2008 to 26.2% in 2012, before declining to 25.7% in 2013. The EBITDA margin grew to ~27% in 2014 and remained at almost the same level in 2015 before increasing to around 29% in 2016. We expect margins to remain near 40% by end of our forecast period. There could be almost 15% downside to our price estimate, if margins were to decline to the 2008 levels of 20% over our forecast period.

Makeup

Estee Lauder's Makeup Market Share: We currently forecast Estee Lauder to gain share in the global makeup market from 14% in 2016 to 19.2% in 2018, it is expected to reach almost 20% by the end of our forecast period. There could be a marginal downside if Estee Lauder fails to gain market share over our forecast period.

Estee Lauder's Makeup EBITDA margin: Estee Lauder's Makeup EBITDA Margin increased from 19% in 2008, to 22% in 2016, and we expect it to gradually increase to 24% going forward. There could be close to 10% downside to our price estimate if margins were to decline to the 2008 levels of 19%.

Despite a global presence, about 40% of Estee Lauder's net sales come from the Americas, with Europe, Middle East and Africa contributing 38%, and Asia-Pacific constituting the remaining 22%. The company's increased focus on the Asia-Pacific market is expected to further increase in the future.

${header:sourcesofvalue}

The Skin Care and Makeup segments have the highest contributions to Estee Lauder's value. Skin Care forms the priority category for the company, contributing ~50% of Estee Lauder's stock value, and Makeup contributes around 40%. The Skin Care segment is also the most profitable of all its beauty products, generating an EBITDA margin of 27%, compared to the company average of around 24%.

Market sizes and market shares in Skin Care Vs Makeup

The Skin Care market grew by 7.4% in 2014, and 5% in 2015 and 2016. The Skin Care market is currently valued close to $130 billion and could cross $170 billion in the next five years.

In the Makeup category, Estee Lauder had a higher market share of around 14% in 2016 (that increased from 12% in 2010), but the overall market size of the Makeup segment is about half of skin-care. The overall Makeup market is currently valued around $70 billion and could exceed $80 billion by the end of our forecast period.

Higher margins in Skin Care compared to Makeup

We estimate that Estee Lauder's skin care EBITDA margin was around 27% in 2018, compared to 24% for the Makeup business.

${header:trends}

Strong prestige beauty sales growth in 2018

Global growth of the prestige beauty segment is outpacing growth in the mass beauty segment. We expect this to benefit Estee Lauder's premium brands which earn the company higher profit margins.
The U.S. prestige beauty industry reached $16 billion in 2018, growing 7% in dollar sales, compared to 2015, according to the global information company The NPD Group. At 13%, the makeup segment experienced the healthiest growth, while fragrance grew 4%, and skincare increased by 3%.

Booming Skin Care due to anti-aging creams

Anti-aging creams and anti-cellulite skin care products are in high demand among aging populations in developed countries notably Japan (oldest demographic), the US, and Western Europe. Half of Estee Lauder's skin-care business comes from anti-aging products. The anti-aging market comprises of those products that can treat multiple signs of skin aging at one time, and is a fast-growing segment under the anti-aging beauty products. Estée Lauder launched its first global anti-aging cream in Europe in February 2012 and a China specific skin care brand Osiao in October 2012.

Growth of natural products categories and "Masstige" segment, as well as male product lines

There is a growing demand for natural / organic products in most countries, a trend led by the developed markets in the US and Western Europe. Additionally, there is an increased preference for less synthetic, eco-friendly, and more natural products and packaging.

There is a growing trend towards the so-called "Masstige," or premium brands sold at lower prices through mass distribution. In addition, beauty care products focused on men is the latest niche being targeted by most players globally. In developed markets, particularly in the US and Western Europe, the introduction and extension of the men’s product lines is a major source of growth.

Focus on travel retail

Estee Lauder has capitalized on the strong growth in its travel retail channel to capture the attention of travelers from emerging markets, who either buy in the channel, in stores at their destination, or when they return to their homes. The channel has performed particularly well for Estee Lauder within Europe, Asia-Pacific, Middle East & Africa, generating double-digit net sales growth in fiscal 2017 and 2018. The main drivers to the travel retail segment growth were: the launch of new initiatives, an expanded distribution network, an increase in global airline passenger traffic, and accelerated orders.

In 2014, the global travel retail market was valued at ~64 billion and is estimated to reach at around $85 billion in 2020.(Link)
Global travel retail has quickly become the fastest-growing retail channel for beauty, fashion, and accessory products. The market is driven by expanding passenger volumes, especially in emerging markets. Global Airport Retailing information for 2012 reveals that the Asia-Pacific airport retail spending stood at $12.2 billion, while spending in Europe was $10.6 billion and for the Americas $7 billion. By 2019, it is expected that the spending will reach $23.2 billion for Asia Pacific, whereas for the Americas and Europe the figures will be $10.1 billion and $12.4 billion, respectively.

How Does Trefis Modelling Work?

How do we get the historical numbers for this chart?

Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.

Who came up with the Trefis forecast for future years?

The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.

How does my dragging the trendline on the chart impact the stock price?

We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.

We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.

EXPLORE TREFIS

By using the Site, you agree to be bound by our Terms of
Use. Financial market data powered by Quotemedia.com.
Consensus EPS estimates are from QuoteMedia and are updated every weekday.
All rights reserved.